The Money Behind the Anti-McCain Ad

With Sen. John McCain clinching the Republican presidential nomination, a new Democrat-funded group has already begun an ad campaign labeling him the "McSame" as President Bush.

The campaign represents the opening salvo from a consortium of top Democrat donors, operatives and unions who at this point have raised $6.75 million for the election season. The ad campaign is an example of what is expected to be a messy advertising battle between a slew of independently operating liberal and conservative groups, with hundreds of millions of dollars spent on each side.

The Center for Investigative Reporting and National Public Radio have traced the flow of money and interwoven connections behind the anti-McCain ads, which are being run by the Campaign to Defend America, a nonprofit set up last year by MoveOn.org co-founder Wes Boyd, among others.

The group has been running ads in Erie, Pennsylvania over the past weeks, and plans to spend more than $1 million on the anti-McCain ad, according to a press release.

The group's money comes from the Fund for America, a new 527 organization run by major Democrats and top union officials to help coordinate the effort to take back the White House. The Fund's money comes from billionaire investor George Soros ($2.5 million), the Service Employees International Union ($2.5 million), and hedge fund manager Donald Sussman ($1 million), among others. Its leadership includes former President Clinton chief-of-staff John Podesta, Taco Bell heir Rob McKay and executives from SEIU and a national teacher's union.

"A trillion dollars in Iraq over the next ten years. McSame as Bush," narrates the ad. "Tell John McCain we need a new direction. Not the McSame old thing."

As an independent organization, CDA can raise and spend unlimited amounts of money, as long as it doesn't coordinate with the candidate or party committee that it is helping.

CDA uses lawyers who also represent the Democratic National Committee. For example, DNC general counsel Joseph E. Sandler helped incorporate Campaign to Defend America in March 2007, according to documents. Sharing lawyers is usually not a violation of the "coordination" rule, as long as the lawyers don't share or influence strategy, says election lawyer Kenneth Gross.

But it can raise the question of the appearance of improper coordination. Gross notes that in 2004, a legal advisor to President Bush's campaign resigned because he had also represented the independent group Swift Boat Veterans for Truth.

The McCain ad isn't the only production of the Campaign to Defend America. The group is closely affiliated with Americans Against Escalation in Iraq (or "Iraq 2008"), a coalition of liberal groups that ran the "Iraq Summer" campaign last year, which organized grassroots opposition to Republican members of Congress who opposed withdrawal timetables for the war in Iraq. The Americans Against Escalation coalition is an alias for CDA, according to records filed with Washington's secretary of state.

The Campaign to Defend America itself is organized as a 501c4 nonprofit organization, a form of tax-exempt group becoming more popular among political operatives because it doesn't have to disclose its donors. As yet, however, the group has not received tax-exempt status by the IRS, according to an IRS spokesman.

But running a TV ad about a candidate close to an election has stricter rules, which is why CDA filed papers revealing its funding. In the filings, CDA also claimed a special exemption that would allow it to use stronger wording than other organizations, explicitly urging voters to vote for or against a candidate.

Only organizations that don't accept any corporate or union money qualify for that exemption. CDA's funder, the Fund for America, is located at the Service Employee International Union's Washington D.C. headquarters, counts union officials as its directors, and took in $2.5 million in union funds.

The Fund for America, however, sent only non-union money to CDA and reimbursed SEIU for staff and office expenses, steps it must take for CDA to follow the letter of the law, according to campaign finance experts.

Whether or not CDA may be violating the spirit of the rule—"that's a political or moral question," says Larry Noble, former general counsel to the Federal Election Commission. "Your spirit may be different than mine. People can't be prosecuted for violating the spirit of the law. If you're allowed to do it, you're allowed to do it."